Jewellers Suggest 5 Ways India Can Save Forex Without Giving Up On Gold

As Prime Minister Narendra Modi calls for conserving foreign exchange (forex) reserves amid rising global uncertainty and a widening trade deficit, India’s jewellery industry believes the country can reduce its dependence on imported gold without curbing consumer demand for the precious metal.

The All India Jewellers and Goldsmith Federation (AIJGF) has proposed a series of structural reforms aimed at mobilising idle domestic gold, reducing imports and lowering pressure on the rupee and current account deficit.

According to Times of India, the AIJGF has recommended setting up a bullion bank within the GIFT-IFSC or India International Bullion Exchange (IIBX) framework to act as a central institution for mobilising, lending, standardising and settling

gold within the domestic market.

India imported a record $71.98 billion worth of gold in 2025-26, making the metal one of the country’s largest import items. Gold alone now accounts for over 9 per cent of India’s total imports, increasing pressure on foreign exchange reserves and the trade deficit.

Industry representatives say India already holds massive quantities of privately owned gold, much of which remains locked inside households, lockers and temples. Instead of discouraging gold ownership, the sector wants the government to bring this idle gold into the formal financial system.

Here are five major measures proposed by jewellers to help India save forex without giving up on gold consumption:

1. Create A Dedicated Bullion Bank

The industry’s biggest recommendation is the creation of a regulated bullion bank within the GIFT-IFSC or India International Bullion Exchange framework. According to jewellers, such a bank can function like a central institution for gold deposits, lending, settlement and standardisation. Instead of importing fresh gold every time jewellers need inventory, domestically mobilised gold could be recycled and circulated within the system.

The federation estimates that a well-designed bullion banking structure could eventually reduce annual gold imports by 200-300 tonnes.

2. Mobilise Idle Household Gold

India is estimated to possess one of the world’s largest privately held gold stocks. However, most of it remains financially unproductive. Jewellers want policies that encourage households to deposit unused gold into formal channels in exchange for returns, interest or financial instruments. This can increase domestic availability of gold and reduce reliance on imported bullion.

The industry believes gold mobilisation can work similarly to how banks mobilise idle cash deposits.

3. Revamp The Gold Monetisation Scheme

The Gold Monetisation Scheme (GMS), launched in 2015, was intended to bring household gold into the banking system. However, the jewellery industry says the scheme failed to scale because of operational hurdles, taxation concerns and lack of incentives.

The federation has urged the government to redesign the scheme to make it simpler and more attractive for households and institutions.

Industry players say easier deposit procedures, better returns and wider participation by jewellers could help revive the programme.

4. Allow Gold ETFs To Lend Physical Gold

The AIJGF has proposed permitting gold exchange-traded funds (ETFs) to lend 20-30 per cent of their physical gold holdings through a regulated bullion banking framework. Currently, large quantities of gold held by ETFs remain passively stored. Jewellers argue that allowing controlled lending can improve liquidity in the domestic market and reduce the need for fresh imports.

The move could also deepen India’s gold financing ecosystem and create an additional domestic source of bullion supply.

5. Introduce Digital Gold Deposit Certificates And Tax Neutrality

The industry has also recommended introducing dematerialised bullion deposit certificates that can be used as collateral for loans. Such instruments could help integrate gold more deeply into the formal financial system while improving transparency and traceability.

In addition, jewellers have sought tax and GST neutrality for intra-system gold transfers to ensure gold can move efficiently within the formal ecosystem without triggering repeated tax costs.

The federation has also proposed creating a national dashboard to track gold mobilisation and import substitution in real time.

Why Gold Imports Matter For India

Gold imports directly impact India’s foreign exchange reserves because the country pays for imported bullion in dollars. A rise in gold imports widens the trade deficit, which is the gap between imports and exports, and increases pressure on the current account deficit and the rupee.

India’s merchandise trade deficit widened to $333.2 billion during 2025-26, while the current account deficit rose to $13.2 billion in the December quarter, according to RBI data.

The surge in import value has also been driven by soaring global prices. Gold import prices rose from $76,617 per kg in FY25 to nearly $99,825 per kg in FY26.